Efficient Market Hypothesis And Stock Market Anomalies: Empirical Evidence In Four European Countries

Abstract

The stock market efficiency is the idea that equity prices of listed companies reveal all the data regarding the company value (Fama, 1965). In this way, there isn’t possible to make additional returns. However, evidence against the Efficient Market Hypothesis is growing. Researchers studied Calendar Anomalies (CAs) that characterised financial markets. These CAs contradict the efficient hypothesis. This research studies some of the most important market anomalies in France, Germany, Italy and Spain stock exchange indexes in the first decade of new millennium (2001-2010). In this study, to verify the distribution of the returns and their auto correlation, we use statistical methods: the GARCH model and the OLS regression. The analysis doesn’t show strong proof of comprehensive Calendar Anomalies. Some of these effects are country-specific. Furthermore, these country-anomalies are instable in the first decade of new millennium, and this result demonstrates some doubt on the significance of CAs.

Historical evolution of monthly anomalies in international stock markets

“…Referring to higher than average returns in October as compared to other months, both Ahmed & Boutheina (2017), Balaban et al (1995), and Floros (2008) did not find evidence of the Mark Twain effect in the Tunisian, Istanbul and Greek stock markets, respectively. Furthermore, Rossi & Gunardi (2018) did not find any significant evidence of the Mark Twain effect and December effect in Germany, France, Italy and Spain. However, Norvaisiene et al (2015) found evidence of the Mark Twain effect in Estonia.…”

“…Our results are consistent with the existing literature. The fact that a complete history of the various markets was used adds weight to the work of Marquering et al (2006), Perez (2018) and Rossi & Gunardi (2018), amongst others, who in the main highlighted the disappearance of anomalies over time. Or in other words, that markets evolve to become more efficient.…”

“…Suggesting that the January effect has since disappeared in advanced markets (see Marquering et al (2006) and Perez (2018)). For example, Floros (2008) found no evidence of the January effect in the Greek stock market, Rossi & Gunardi (2018) found no evidence of the January effect in advanced markets between 2001 and 2010, and Giovanis (2009) found no evidence of the January effect in 36 out of 55 stock markets. Marrett & Worthington (2011) found higher returns in April instead of January.…”

“…This is, however, not a recent realisation as others have shown that the predictions of the EMH are not absolute (see Grossman & Stiglitz (1980), Shiller (2000), Shiller (2003), and Akerlof & Shiller (2009)). Furthermore, Rossi & Gunardi (2018) contend that the calendar anomalies literature continues to be fragmented and therefore the study of calendar anomalies remains relevant.…”

The Determinants of Cooperative Banks’ Community Service—Empirical Study from Poland

“…An important aspect of the performed study was the appropriate choice between foreseen and random effects. The correlation occurrence between independent variables and random effects was tested by the Hausman test, which was very helpful in making the right choice [32]. This test allows verification of whether the estimator for foreseen and random effects was concurrent in terms of the same point.…”